10Apr11:22 amEST

Still Looking for a Bear Trap in Rates

Color me firmly in the contrarian camp regarding two views which have increasingly become mainstream. The first being the death of the Dollar, or "de-Dollarization." The second being that rates have peaked and The Fed is more or less done hiking as inflation collapses. 

I am on the other side of both of those views.

First and foremost, while I believe the United States will unfortunately lose its standing as the world's dominant superpower by the end of this century, and likely the world's reserve currency status for the Dollar, we are also only a little over two decades into the century. I do not see the Dollar being totally cast aside for a few decades. 

Recently, the de-Dollarization cry has reached a fever pitch, crossing over beyond financial media into the mainstream. This is typically a contrarian sign, and I am bullish the UUP ETF for a Dollar rally, which should also pressure most equities. 

On the topic of rates, I expect a hotter CPI this Wednesday morning. Used car prices are still in the stratosphere, and gasoline prices have shot up over the past month. Moreover, if you go to the grocery store then you know it is not exactly like food prices have collapsed, ether. 

On the TNX daily chart, below, I continue to look for the recent dip in rates to be a false breakdown as surprised should still be to the upside for sticky high inflation.

And that goes double (triple..trillions) given how quickly The Fed and Treasury folded to inject liquidity last month at the first sign of regional banking issues. 

One of the first lessons we learn in high school economics is that there is no free lunch on Wall Street. With inflation entrenched, it is surreal to see how cocky many strategists are that rates will simply collapse from here--Sure they will...if we have a 1929 crash. 

But barring that, I still think inflation surprises to the upside this week. 

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